The economy of Kenya is expected to grow between 5 and 5.6 percent in this year 2017. This is supported by an increase in government spending, strong performance in transport, trade and tourism.
The government needs to grow its expenditure by the targeted 16.4 percent according to a report released by Britam Asset managers, and subsequently, achieve the expected 17.6 percent increase in revenues in order to meet the projected economic growth. The government should, therefore, spend to sustain GDP growth above 5.0% in 2017, as private sector credit growth remains subdued.
However, the report points out that economic activity is expected to slow down, 2017 being an election year. Historically, Kenya’s elections years have been associated with low GDP growth, as the polls delay private sector investments due to political uncertainty.
According to the report, other factors likely to affect the growth of the economy include high inflation, drought, and increased global oil prices.
Heading into 2017, food inflation is expected to be the main driver of overall inflation with the cost of transport and household items also going up. Matatu fares, petrol prices, Kerosene and electricity respectively will affect inflation significantly
Speaking during the release of the report themed “Sustaining Growth in a Resilient Economy”, Britam Asset Managers CEO Kenneth Kaniu said that unfavourable climatic conditions and drought are expected to affect agricultural productivity, increase electricity costs and reduce the availability of water.
“We expect the above factors to culminate in upward pressure on overall inflation in 201. Inflation will, therefore, trend towards the upper range of CBK’s target of 7.5% in 2017,” said Kaniu.